By now, most people have received their W-2s, 1099s or other relevant tax documents in preparation for their tax filings.
What types of tax benefits are available for parents?
There can be a number of tax benefits for a parent including the following which the parent may meet the qualifications for:
- Earned Income Tax Credit,
- Dependency exemption for the child,
- Child tax credit, additional child tax credit, or credit for other dependents,
- Head of household filing status,
- Credit for the child and dependent care expenses, and
- Exclusion from income for dependent care benefits.
Which parent can claim the child on their taxes?
But who gets to claim a minor child on their taxes after divorce? The custodial parent is usually considered the parent that has primary physical custody of the child. The court may have also awarded primary physical custody to you or your former spouse. By default, the primary physical custodian is entitled to claim the minor child according to the IRS rules. But in actuality in terms of divorce, the answer may be more complicated than that. First, there is an exception which would allow the noncustodial parent to claim these credits by treating the designated child as a dependent of the noncustodial parent. Second, there are many families in which the parents share joint custody of the minor child/children so neither party is considered the primary custodial parent.
Let's begin by looking at the exception laid out above. The place to find this information would be in your settlement agreement. Within the settlement agreement, you and your spouse may have already determined how you are going to claim the child/children, for which years, and for which children. As stated in the IRS rules, in order to qualify for this exception several requirements must be satisfied:
- The parents are divorced or legally separated under a decree of divorce or separate maintenance, are separated under a written separation agreement, or lived apart at all times during the last 6 months of the year, whether or not they are or were married.
- The child received over half of his or her support for the year from the parents.
- The child is in the custody of one or both parents for more than half of the year.
- The custodial parent must sign IRS Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent). The noncustodial parent must attach a copy of Form 8332 to his or her Form 1040.
Next, if the parties share the child on an equal basis, the custodial parent is the party with the higher adjusted gross income (AGI).
But what happens if you or your ex incorrectly claimed your dependents? You can submit the supporting documentation using this IRS form to claim your dependent along with your W-2 or 1099 and tax return. Upon receipt, the IRS will review both tax returns and apply the tiebreaker rules found below. The process usually takes 8-12 weeks after the IRS has received the documents.
What are the tax tiebreaker rules?
Under the tiebreaker rules, the child is generally treated as a qualifying child of:
- The parents if they file a joint return and claim the child a qualifying child;
- The parent if only one of the persons is the child's parent and the parent claims the child as a qualifying child;
- The parent with whom the child lived for the longer period of time during the tax year if two of the persons are the child's parent, they do not file a joint return together, and both parents claim the child.
- The parent with the highest AGI if the child lived with each parent for the same amount of time during the tax year, they do not file a joint return together, and both parents claim the child;
- The person with the highest AGI if no parent can claim the child as a qualifying child; or
- The person with the highest AGI if a parent may claim the child as a qualifying child but no parent claims the child as a qualifying child, but only if that person has an AGI higher than any parent who may claim the child as a qualifying child.
If you questions about what your court order or settlement agreement could mean for you in future, we would be happy to speak with you as you determine the tax benefits with your tax preparer.
Divorce Lawyer in Virginia
Alisa practices family law as a divorce lawyer from the Fairfax and Manassas offices in the Circuit and Juvenile and Domestic Relations District Courts for Fairfax County, Prince William County and Loudoun County.